Pres. Sali Berisha’s ruling Democratic Party (PDS) withstood the damaging effects of defeat in the November 1994 constitutional referendum but still faced formidable political, economic, and social problems in 1995. Following the referendum defeat, the PDS replaced incompetent and corrupt personnel at all party levels. The leading opposition Socialist Party (the former communist party) threatened the PDS’s hold on power, while the PDS cited notable successes in economic and foreign affairs and predicted victory in the parliamentary elections scheduled for March 1996.

Albania’s admission as the 36th member to the Council of Europe was a huge political success and came after the country proved it had made substantial progress in implementing economic, political, and social reforms. At the same time, the administration came under sharp criticism for not allowing the judiciary to function independently. A new penal code and penal procedure came into force, however, enhancing the country’s commitment to upholding human rights. Among the 49 new legislative decisions approved by the People’s Assembly in 1995 were land and property laws that positively affected the flow of domestic and foreign investments, especially in the field of agriculture. The process of privatization continued, with some 1,400 small-sized enterprises privatized (only some middle- and large-sized companies awaited privatization). Albania’s $700 million foreign debt was substantially reduced. As a result of an agreement between Albania and 41 Western banks, the country’s debt owed to those institutions dropped from $500 million to $100 million on September 1.

On the domestic front gross domestic product grew by an estimated 6%, and the budget deficit was expected to be reduced to 7%. Inflation dropped to about 10%; the national currency, the lek, stabilized ($1 to 90 leks); and unemployment hovered at 260,000 (about 18%), despite the fact that an estimated 500,000 workers were employed abroad. The agricultural, construction, and private-service sectors registered high rates of growth--15%, 90%, and 25%, respectively. The industrial sector remained the weakest economic link, with continued production losses. Exports also lagged.

Continued progress was made in foreign affairs, with the exception of an impasse between Tirana and Belgrade. A slight improvement in Greek-Albanian relations was evidenced, and a first-ever meeting between U.S. and Albanian heads of state occurred in September. U.S.-Albanian military cooperation developed quickly. Joint projects in 1995 included U.S. intelligence-gathering flights to Bosnia and Herzegovina from bases in Albania, exchanges of high-level military delegations, medical and military exercises, and the construction of Albania’s only military hospital.